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A model of principal-agency control of wastes under technological progress

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  • Hans Gottinger

Abstract

We analyze performance and outcome of principal-agency relationships in an environment with pollution externalities and technological progress. We assume that firms may not purposely violate the pollution control regulations but nonetheless generate some pollution due to negligence. The models allow firms two possible actions: either to increase the level of treated waste legally or pay an expected penalty if illegal pollution is detected. We show that in a world with pollution externalities, technological progress does not guarantee increases in the welfare level. Most important for policy purposes, the analysis shows the trade-offs between the policy instruments: penalties, taxes/subsidies and treatment costs in a world where technological progress occurs and firms may violate the law. Copyright Kluwer Academic Publishers 1996

Suggested Citation

  • Hans Gottinger, 1996. "A model of principal-agency control of wastes under technological progress," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 7(3), pages 263-286, April.
    • Handle: RePEc:kap:enreec:v:7:y:1996:i:3:p:263-286
    DOI: 10.1007/BF00782149
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    References listed on IDEAS

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    1. Magat, Wesley A., 1978. "Pollution control and technological advance: A dynamic model of the firm," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 1-25, March.
    2. Carol Adaire Jones, 1989. "Standard setting with incomplete enforcement revisited," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(1), pages 72-87.
    3. Lee, Dwight R., 1984. "The economics of enforcing pollution taxation," Journal of Environmental Economics and Management, Elsevier, vol. 11(2), pages 147-160, June.
    4. Hans W. Gottinger, 1994. "Regulation and Control of Hazardous Wastes," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 130(I), pages 63-88, March.
    5. Downing, Paul B. & White, Lawrence J., 1986. "Innovation in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 18-29, March.
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